Vodafone Idea Update: There is news of relief for Vodafone Idea, the country’s third largest telecom giant, which is facing financial crisis. The government has given its consent to the company to convert the interest amount made on its outstanding AGR into shares. The government owes Rs 16133 crore towards the interest amount on Vodafone Idea.
After this decision of the government, Vodafone Idea will issue 1633 crore shares with a value of Rs 10 each. After converting this outstanding loan into shares, the government’s stake in Vodafone Idea will be close to 33 per cent. With this, the promoter’s stake in the company will also come down from 74.99 per cent to less than 50 per cent. However, the government will be given shares in Vodafone Idea at a value of Rs 10, but on Friday, the share of Vodafone Idea has closed at Rs 6.85. Means the share is trading 31 percent below the rate at which the shares are being issued by the government.
Actually Vodafone Idea is immersed in the burden of debt and it needs huge capital to run the company. But the promoters of the company were not seen in the mood to invest capital, then the government had made it clear that until the promoters do not invest capital, the government will not take the shares of the company in lieu of the outstanding loan. The matter of converting the outstanding loan into shares was pending for a year. But recently the company’s officials have met top officials of Telecom and Finance Ministry, after which the government has decided to convert the debt into shares.
First the promoters of the company want to infuse capital of only Rs 2000 to 3000 crores which is insufficient to rejuvenate the company. Vodafone Idea needs Rs 40,000 to 45,000 crores to operate in a better way. If 50 percent of this is received as a loan from the bank, then the remaining amount will have to be deposited by the promoter. Without promoter’s funding neither any investor will invest in the company nor any bank will come forward to support the company. The company is not able to raise money from foreign investors also because these investors want the government to take stake in the company first.
In the month of December, the company had approached the country’s largest bank SBI to take a loan of Rs 15000 to 16000 crores. However, the bank had sought an explanation from the company regarding the government’s stake in Vodafone Idea. The company also owes to the tower company.
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